F&I

NADA: Consumers Desensitized to Gas Price Volatility

October 9, 2012
• by Staff

MCLEAN, Va. — Despite the recent spike in gas prices, the NADA Used Car Guide is sticking with its belief that consumers won’t overreact to the volatility and will continue buying vehicles that best fits their lifestyle. And based on recent wholesale pricing trends, that means trucks and SUVs.

On Monday, the national average price for a gallon of gas was $3.818, the highest ever for this time of year, according to AAA’s daily fuel gauge report. The most notable increase was felt in California, where prices jumped 50 cents in a week’s span. And as of Oct. 1, seven states claimed gas prices above $4.

But the rise hasn’t deterred the NADA Used Car Guide’s stance that gas prices will have little impact on the vehicles consumers seek out, especially since this is the second year car buyers have dealt with a summer price hike.

“Nothing has really changed,” said Larry Dixon, senior automotive analyst for the NADA Used Car Guide. “Considering that we’ve seen $4 and have been around $4 over the last couple of years, we’d need to move up into the $4.25 to $4.50 range to see the reaction we’ve seen in the past.”

In July 2008, gas prices rose to $4.11 per gallon, causing car owners to unload their trucks and SUVs in a panic. That reaction drove down residual values for those vehicles at auction, and forced automakers to cut production of trucks and SUVs. But the NADA Used Car Guide said consumers are now desensitized to that volatility.

When gas prices spiked 42 cents in August, the NADA Used Car Guide reported that the rise was having the opposite effect on auction prices, with prices for large pickup trucks declining by $525. In comparison, prices for a three-year-old compact fell by $1,350, while the average price of a three-year-old compact hybrid fell by $2,718.

In September, wholesale prices for compact cars fell another 3 percent from August, while large pickups and SUVs dropped 1.2 and 1.9 percent, respectively. On a year-over-year basis, wholesale prices on one-to-five-year-old large pickups and SUVs increased 5.9 and 2.1 percent, respectively, while wholesale prices on compact cars increase slightly by 0.3 percent. Wholesale prices on a mid-size car fell 1.3 percent.

Dixon believes the most recent spike is only temporary, and listed out a recent string of events that led to the price increase. There was the Aug. 6 fire at a Chevron refinery in Richmond, Calif., and a power failure earlier this month at an Exxon Mobile refinery in Southern California. Also this month, Chevron shut down an oil pipeline that moves crude oil to Northern California.

A problem with a pipeline in the Midwest and anti-American sentiment in the Middle East also factored into the rise of gas prices.

“Consumers are going to pick a vehicle that best meets the needs of their household, and we know American consumers tend to favor trucks and SUVs,” Dixon said. “We just haven’t seen that dramatic reaction we saw in 2008. And we’ve experienced two spikes in gasoline prices, the largest one occurring last year. “

Larry Dorfman will step aside as chief executive of APCO Holdings, the company he founded 35 years ago and grew to include the EasyCare, GWC Warranty, and Covideo brands, yielding the company’s chairman and CEO position to former J.D. Power head Finbarr O’Neill.

Two years ago, Chris Brown went looking for a way to facilitate sales, trade-ins, and financing for car buyers who prefer to shop online. Today, his Seattle-area Subaru dealership is doing just that, and he says the experience he and his team deliver is just as ‘stress-free’ as ever.

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